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Uninsured Drivers are Causing Costs to Rise — Here's Why that Matters for Agents

by Precise Leads

May 21, 2018

With your help, your clients can find affordable coverage even as premiums rise.

Several factors have converged to drive up auto insurance costs recently, making it more important than ever for agents to help their clients find the most affordable and effective coverage. Indeed, a scan of recent studies confirm the astronomical rise in auto rates: in January, the Consumer Price Index (CPI) reported car insurance rates rose 7.9% last year on top of a 7% hike in 2016.

Similarly, Zebra, an auto insurance pricing platform, calculated the average U.S. annual auto insurance premiums had reached an all-time high of $1,427. So what’s behind this ballooning costs, and how can agents bring down those costs for their clients?

High Tech Cars, More Uninsured Drivers

A major factor behind rising costs is that today’s technologically advanced vehicles cost more to repair. The charge to fix a bumper attached to a 2016 entry-level luxury car model comes in at $3,550 — compared to $1,845 for a similar vehicle in 2014, according to Liberty Mutual Insurance.

Further, more uninsured drivers are on the roads today. A recent survey from the Insurance Research Council (IRC) and the Hanover Insurance Group revealed one in eight of Americans drive with no car insurance coverage. Although that percentage represents a drop from a high of nearly 15% in 2003, it’s above the 12.3% rate logged in 2010.

When an uninsured driver causes an accident, the insured driver and his or her insurer pays the claim, which, according to the IRC, may amount to $20,000 for medical expenses and lost wages alone. And that figure excludes repairs to the vehicle. Add to these trends a rise in distracted driving and it’s easy to see why auto insurers are seeing mounting claim costs.

How Insurers are Responding

Unsurprisingly, insurers have reacted to these trends by raising premiums. Companies have also responded by cutting back on advertising, which a recent study contends has led to a drop in consumers actively shopping for personal auto insurance.

Fewer ads means consumers are not being motivated into thinking about purchasing coverage that they need. David Drotos, VP of Insurance Solutions at TransUnion, speculated in a statement that insurers may have reduced advertising budgets to offset higher losses due to more accidents.

How Agents Can Help Clients Get Affordable Coverage

Your clients may get a severe case of sticker shock when presented with sky-high auto premiums, but going without insurance should not be an option. On the positive side, auto insurance remains a competitive marketplace with insurers fiercely vying for new policyholders. Experienced agents are in a good position to guide their clients to affordable coverage that provides adequate protection. Start by talking over the following strategies with your clients:

  1. Get Multiple Quotes. On behalf of your client, get at least three to four quotes to compare prices when a policy is up for renewal or for a first-time purchase. Don’t base a final decision solely on price, however. Review the financial stability of the insurer and its ability to service and pay claims.
  1. Shop for Discounts. Many insurers offer discounts if a driver installs an anti-theft device in his or her car, passes a defensive driving course, or reduces the miles they drive. Although your client may be hesitant to buy an anti-theft device or pay for a course, point out the cost savings gained by taking those actions.
  1. Raise the Deductible. To lower the premium, your client may want to consider raising the deductible. The Insurance Information Institute estimates boosting a deductible from $200 to $500 shaves 15% to 30% off the cost of collision and comprehensive coverage. A $1,000 deductible slashes a premium by as much as 40%. Since your clients pay the deductible, make sure they have enough cash on hand to cover that amount if they’re involved in an accident.
  1. Bundle Policies. Insurers oftentimes dangle discounted rates if your client buys more than one policy from them. Of course, always comparison shop bundled deals versus separate policies to guarantee your client pays the lowest price for auto coverage.

These tips are a great place to start, but they’re not the end of the story. Driving safely and maintaining a solid credit rating, for example, can help your clients reduce auto insurance premiums over time. Whatever strategies you recommend, now’s a great time to discuss how clients can make sure the current uptick in rates won’t drive them into the red.

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